houston-development

That plot won't stay empty for long. Even with the crappy economy, the location is too good to pass on, and I bet they is already a developer waiting to snatch it up. Hopefully something grand will come out of it.

nothing is going to happen anytime soon, regardless of how "irreplaceable" a site may be. no developer wants to put up 30 - 40%, extremely tough underwriting, and take full recourse on a loan...

sad thing is that's best case if they can find one.

or kjb is talking about the hisd site on taft and w gray.

edited to add link.

We have been told at least 6 months of delays.

i would be absolutely shocked if hanover starts construction in six months. anticipate a two to three year delay. however, if the economy comes roaring back, this could change. hanover is completely changing their business plan. unfortunately, im not at liberty to discuss the specifics but will say that developing highrises, going forward, are doubtful in the near future.

got slight confirmation that both the hanover tower and the ritz are going to be delayed at least slightly... they still expected both to happen, but they will be phased in.

i can confirm this in regards to hanover.

dont expect their tower to be built anytime soon.. i would consider it postponed indefinitely rather than slightly.

some excerpts from the proposed contract, provided by sellers a month ago:

BUYER ACKNOWLEDGES THAT IT HAS BEEN FURNISHED A COPY OF THE ENGINEERING REPORTS ATTACHED HERETO AS EXHIBIT D. BUYER SPECIFICALLY ACKNOWLEDGES THAT THE BUILDINGS ON THE PROPERTY ARE OBSOLETE AND UNINHABITABLE AND WILL BE DEMOLISHED OR REMOVED BY BUYER AT ITS SOLE COST AND EXPENSE

1. Maintenance and Operation. The Improvements are in poor condition and must be removed by Buyer. Seller is under no obligation to maintain the Improvements. Certain of the Improvements are

disclaimer:

some people may not like what i'm about to post. if you live there, know someone that lives there, or have very strong sympathetic emotions for the residents, please either don't read futher or lash out at me.

just my $0.02

most of the owners knew the property was seriously in need for major repairs. this isn't something that recently came up, it's been known for years. to their credit, it is VERY difficult and time consuming to get everyone on board to sell. they were able to get majority approval to sell based upon the economics of renovation and bringing the building up to code. again, that was an accomplishment.

on the other hand, knowing how bad things were, they shouldn't have strung this out as long as they did. some/most/all were convinced that they could make some really good money on the transaction and didn't even think twice what could happen if the city came in for an inspection. who's fault is that? well, i have my thoughts and will keep them to myself as to not offend anyone. additionally, the residents knew the city was coming in due to notices placed on their doors last month:

This building is in worsening condition and may experience catastrophic failure at any time.. The building is not suitable for habitation.

ironically, the brokers requested best and final bids the day afterwards. coincidence??!?

regardless, onus falls with the homeowners. sure, they can complain to the media, try and generate sympathy, but i ain't buying it because i know greed when i see it.

one theory i have (which is purely speculation) is that the owners jaded a prospective buyer and they went to the city inspectors.

personally, i think it makes some-what economic sense around $70 psf but someone will probably come in around $80. hypothetically if i had the deal under contract at $80 and saw this news, bet your bottom dollar i would be retrading the deal in a heartbeat. if they got their act together a year ago, which is what they should have done in hindsight, this deal would have easily traded for $90+ psf.

nothing personal, just business.

Is this project ever going to get started?

all i can really say is there may be a change of plans...

Mosaic is doing very well, it just opened and already 100 closings.

really?

i heard 2 months ago less than 50 sold (ie funded and closed). glad to hear sales are coming along.

best of luck to your staff.

A big part of me thinks that they are putting up the trailer and will use the block for parking once they break ground across the street for Camden Travis.

think that is the case but i could be wrong.

There are actually discussions taking place to make the rules more flexible. Another, possibly worse rule is the number of spaces required for retail centers. In areas such as midtown, where there are transit options, the suggestion has been made that not as many parking spaces are needed. Additionally, street parking is not included in the calculation of how many spaces are needed. A referendum is not needed. City Council can change the parking ordinance to reflect different needs for different areas. These same discussions are being had regarding building setbacks, as well.

for example, morgan's 2222 smith deal. they leased the parking garage land from specs (50 years, i think).

they believe once the lease is up, midtown parking requirements will vanish, and there will not be a need to renegotiate a lease with specs.

or at least that's what they tell perspective buyers.

you're right...the 200 units they planned on at the beginning will certainly be the difference b/w success and failure for the project as a whole.

HA!

that actually made me chuckle out loud.

they are putting up a chain fence around the super block today.

dont know whats going on nor have i heard anything.

maybe the city made them do it..

maybe they are finally moving forward..

If the Gaylord hospitality company was in charge of this project you could pretty much garuntee that it would be a success.

and if my aunt edna had balls, i garuntee (sic) he would be called uncle ed.

sorry, couldnt resist.

tgif

this thing is sick. amazing progress thus far.

also heard the "condos" are just apts, so afaik you can't purchase anything in the whole lot. just leasing residential / office / retail

original plans had apartments and condos abutting each other.

what?!?!

you mean to tell me that they wont make $100MM+ loans by snapping their fingers?!?

well, that's just absurd if you ask me.

I think Houston-Development is confusing you with somebody else from a different thread that was genuinely being a jackass.

if that is the case, bpe has my sincere apologies.

it was similar writing style and broad generalizations.

again, if it wasn't him, im sorry for making that assumption.

ps - i, like ricco, am proud of my jackassedness but only to the appropriate parties.

Here's some quick math: 900 units @ $90,000/unit = $81,000,000 value X 5.5% cap rate = $4,455,000 NOI/year = $371,250/month. Assuming they tore down 2/3rds of the units, the early demolition is costing them $245,045/month in foregone cash flow. It's not the kind of money that will make or break this project. At the same time, it's enough to get someone's attention. No smart delevoper would just leave this much sitting on the table. Clearly they thought they'd be going vertical by now.

bpe3

what?!?!

seriously, stop.

if you don't understand underwriting, please, don't act like you do.

and let's not go back into the debate of economics because i already wasted enough time trying to explain things to you. had you been a tad more receptive back then, probably would be happy to elaborate.

Definitions of what constitutes a "midrise" are hazy. You're correct that Farb is planning a four-story wrap, but in the spectrum of descriptors (low-rise, midrise, highrise, skyscraper), a lot of people--including professionals--consider this to also be a midrise.

since when did people in our profession start calling 4-story stick product a midrise?

geeze, next thing you know people are going to start over-using the term "luxury living", even for C product.

ooops, too late, they already do...

Billboard pic attached...sorry for the low res. They've since addeded a covered chain link fence are the property. Given the placement of the billboard, I would imagine a rendering/advertisement for the complex. Looking forward to the ground breaking.

thanks for the pic. i drove by there on tuesday evening and nothing was there, so that must have gone up afterwards.

i think that billboard is the same one he had up before (for information, please call..) they knocked down the fence.

hes planning on breaking ground in the next 60-days and allegedly has financing.

and its not a midrise, its 4-story wrapped around a parking garage with 2 out-parcels that will be connected via sky bridges.

They're changing their strategy because their proposed ordinance wouldn't have stopped the high rise.

think the strategy was mentioned here before.

its been their back up plan for a while to protect the city from a possible lawsuit.

the niche is correct. i figured it was a given but guess some people need further explination.

and for clarification, i never disputed an interest level but at the end of the day, interest means squat; its all about who can perform. just because there was almost 30 offers on bayou park (or whatever its called) doesnt mean they all were in line with what the seller wanted. im positive ARA encouraged offers, regardless of price, just to say "hey, look how many offers we got on this asset while the capital markets are in the crapper. horray for us!". berkshire went in with the intention to run the apartments as is with the possibility to either renovate or redevelop. they probably put up more than 30% and made a deal with their lender that if they decide to redevelop, they get the financing. in the meantime, the property is cash-flowing and the lender is happy.

for an example about "interest level", there was a lot of interest in shriners. however, some prices came in $20 psf below the winning bid. and my information isnt from a friend of a friend of a friend nor what was printed in the paper; i saw john mcdonald and john olivarri opening the bids with my own two eyes.

as for astroworld, that happened a couple of years ago and would be willing to bet the same buyer could not perform in todays market.

finally regarding the dubia deal on richmond and post oak, again, i would be willing to bet they put up significant equity to appease their lender. they have a crap load of cash and wouldnt be surprised if they put up 50%.

in conclusion, big deals are still happening. lenders, equity players, and GPs can make deals work across the nation. however, the frequency of these types of deals actually closing is significantly less than before. there has to be a great story, soild numbers, and more importantly, the buyer has to be more than capable to perform.

developers today have to put their money where their mouth is more than before. doesnt mean deals arent going to happen, just significantly harder. because of archstone's cost basis in this deal is so unique, they can make the deal work while others cant.

whew.

No. I don't think we are in agreement. Houston-development said...

I think there are buyers out there for $100 million dirt, even in these uncertain times. I'm not sayinging Archstone's tract is worth $100 million. I am saying that a $100 million price tag won't scare everyone away.

and i stand by my statement.

if there were capable and willing buyers, the deal would have sold because its been officially/unofficially on the market for a looong time.

another developer could not purchase the site with intention of redevelopment because their numbers will not pencil out.

but since archstone's cost basis is so low, they can knock down 12-year old product and redevelop the site.

which, what do you know, takes us full circle.... funny how that happens sometimes, eh?

having said that. maybe the announcement will give other developers a new outlook on the site and make archstone an offer they cant refuse.

unlikely but in theory, could happen.

your example is comparing apples to oranges but as you said, we can just agree to disagree on how you view the economics of the deal.

good luck on your sale.

Archstone is not blind to opportunity cost. Although their cost basis in the land is far less, they know damn well that if they redevelop this land, they are, in fact, paying the market price for the dirt. The Bayou Park site and the Deyaar site have both sold in the last 60 days for $50+ million at land value. There were 29 bidders for Bayou Park. I don't think it's that big a jump to $100 million. There are a lot of deep pocketed investors out there who see Houston as a very attractive place to invest.

bpe3

im sorry but i dont follow your logic.

how are they paying market price for the dirt? they purchased the land for about $10, their rents have increased close to 50% (im guessing their original underwriting was for mid $0.80 psf), its inferior construction that no way cost more than $50k/unit to build, and the occupancy has consistantly been over 95%. assuming they just do one refi and they cash out all of their equity (and then some [understatement]) out of the deal.

thats a developer's wet dream right there.

as for thinking there isnt a big difference between $50MM and $100MM on a land play, well, i know many lenders and equity players that would strongly disagree with you.

Didn't the Bayou Park Apartments just sell for around $80 PSF on the dirt? The Archstone tract seems superior given the tremendous amount of street frontage on three main thouroghfares. A $160,000/unit price tag for Memorial Heights equals $81 PSF for the dirt. If someone will pay $80 PSF for Bayou Park dirt, then $80 PSF for Memorial Heights dirt should be a no-brainer.

on the surface, it does appear to be a no-brainer.

problem is, that comes out to just under $100MM, not including demolition costs. you arent going to find any players, especially in this uncertain economic market, that will shell out that much for a speculative land play and knocking down a 12-year old product.

again, keep in mind that archstone's cost basis is probably next to nothing...

for them, it is a no-brainer.

for someone else, not so much.